Banks to take control of two units of Amtek Auto for defaulting on bond repayment

Sources from banking circles said that at a recent meeting held in Mumbai, banks led by IDBI Bank have agreed in principle to convert a part of their debt into equity.Sangita Mehta | ET Bureau | July 15, 2016, 07:14 IST

MUMBAI: Banks will take control of two subsidiaries of Amtek Auto that defaulted on bond repayment last year. Lenders have agreed in principle to take control of Castex Technologies and Metalyst Forging — the two listed subsidiaries of auto component maker.

Sources from banking circles said that at a recent meeting held in Mumbai, banks led by IDBI Bank have agreed in principle to convert a part of their debt into equity. The lenders can take controlling stake by initiating strategic debt restructuring (SDR) that allows them to convert a part of debt into equity in cases where restructuring of debt has not helped in reviving the company.

Banks will invoke SDR on the two subsidiaries of Amtek Auto once they receive the mandate from their head offices, said two senior bankers said. Banks have an exposure of a little over Rs 7,000 crore in both companies. The company did not respond to an email ET sent.

Given the exposure that banks have in these companies, it is not clear how much upside they will have on invoking SDR in the loss-making companies that have market cap of less than 10% of their borrowings.

Close to 23 banks have an exposure of Rs 4,850 crore in Castex Technologies, which reported net loss of Rs 466 crore in FY16. It has a market cap of Rs 421 crore. In the case of Metalyst Forgings, 17 banks have exposure of close to Rs 2,100 crore. It has posted a loss of Rs 230 crore and its market cap stood at Rs 187 crore.

Nearly 32 banks have dues of Rs 21,000 crore lent to Arvind Dham-promoted Amtek Auto group that supplies components to several automobile companies including Maruti Suzuki.

Since last year, the company has been facing financial stress with Amtek Auto reporting Rs 945 crore of loss in FY16. It also defaulted on making payments on its Rs 800 crore bond issue due on September 22 last year.

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